It’s been a hectic first week for the new PM. A series of announcements at 6am each morning, alongside numerous questions about how the policies are going to be paid for.
We try and explain some of the announcements below.
A cut for household electricity bills
The government is removing VAT from domestic electricity bills from 1 October 2026 in time to impact the next Ofgem price cap. This is expected to save around £45 on the yearly Ofgem price cap in October.
The government stated that the cost of this for this financial year will be funded from the cancellation of the £1.8 billion Digital ID programme. However, a former government minister disputed this, saying that the ID programme was unfunded.
The government said that all suppliers are expected to pass the VAT reduction on to their customers, including those on fixed tariffs.
Small businesses which qualify for the domestic energy VAT relief and are not registered for VAT, as well as charities and residential care homes eligible for the reduced rate, will also benefit.
£2 bus fares from January 2027
The government has announced single bus tickets will be capped at £2 in England (outside London) from 1 January until 31 December 2027.
The £2 cap will cost £400 million and is being funded by savings from reprioritising the Department for Energy Security and Net Zero’s budget, including by switching funding for international climate from grants to loans.
Cut in business rates bills for pubs, clubs and live music venues
The government has announced that pubs, clubs and live music venues will receive a 20% cut to their business rates bills from April next year.
The new rate cuts will benefit nearly 32,000 pubs, clubs and live music venues, saving the typical pub an estimated £1,100 in the next financial year and will cost around £100 million.
These changes will be fully funded, including through reviewing reliefs for businesses that do not make a positive contribution to local communities, such as vape shops. The government will also crack down on businesses that sell through online marketplaces but do not comply with their tax obligations.